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Justice News

Five Individuals Charged With Participating In Three Insider Trading Schemes Generating More Than $5 Million In Profits On Inside Information Misappropriated From An Investment Bank

Two Additional Participants Including the Investment Bank Insider Have Pled Guilty and Are Cooperating with the Government

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., the Assistant Director-in-Charge of the New York Field Office of the Federal Bureau of Investigation (“FBI”), announced the arrest of MICHAEL SIVA, ROBERTO RODRIGUEZ, RODOLFO SABLON, a/k/a “Rudy,” JHONATAN ZOQUIER, and JEFFREY ROGIERS for their roles in three overlapping insider trading schemes based on material, nonpublic information (the “Inside Information”) misappropriated from an investment bank (the “Investment Bank”) by a corporate insider. These schemes resulted in more than $5 million in illicit profits between August 2014 and April 2017.

In a 54-count Indictment unsealed today, SIVA, RODRIGUEZ, SABLON, ZOQUIER, and ROGIERS were each charged with conspiracy, wire fraud, and multiple counts of securities fraud and fraud in connection with a tender offer. In addition, Mr. Kim announced the unsealing of guilty pleas on August 9, 2017, by DANIEL RIVAS and JAMES MOODHE, who admitted to their own involvement in the fraudulent schemes and are cooperating with the Government in this investigation. RIVAS, the corporate insider who exploited his role as a technology consultant at the Investment Bank to misappropriate Inside Information, pled guilty before the Honorable Valerie E. Caproni. MOODHE, who received Inside Information from RIVAS, pled guilty before Magistrate Judge Ronald Ellis. Both RIVAS and MOODHE pled guilty to conspiracy, securities fraud, fraud in connection with a tender offer, wire fraud, and making false statements to law enforcement officials.

SIVA was arrested this morning in West Orange, New Jersey. ZOQUIER was arrested this morning in Englewood, New Jersey. SIVA and ZOQUIER are expected to be presented this afternoon in federal court in Manhattan before United States Magistrate Judge Barbara Moses.

RODRIGUEZ and SABLON were arrested this morning in Miami, Florida, and are expected to be presented later today in federal court in the Southern District of Florida.

ROGIERS was arrested this morning in Oakland, California, and is expected to be presented later today in federal court in the Northern District of Califorina.

Acting Manhattan U.S. Joon H. Kim said: “As alleged, the defendants took advantage of an insider at an investment bank to make millions in illegal profits, trading over 50 times in advance of confidential corporate information. The defendants allegedly used code words and encrypted messages to try to avoid law enforcement detection. But despite their efforts to hide their crimes, the defendants’ insider trading schemes have been exposed, and two have already pled guilty federal crimes. Those who seek to cheat the markets by trading on stolen inside information corrupt the integrity of our nation’s securities markets, and we are committed to stopping them and holding them accountable.”

FBI Assistant Director-in-Charge William F. Sweeney Jr. said: “In an industry where confidentiality is key, the defendants allegedly showed no regard. During the years they allegedly passed inside information from one person to another, they tried to work under the radar, but their illegal activity did not go unnoticed. These arrests show our commitment to investigating illicit schemes and bringing conspirators to justice.”

According to the allegations contained in the indictment (the “Indictment”):[1]

The Investment Bank and the Insider

From in or about August 2013 through in or about May 2017, RIVAS was employed as a technology consultant in the Research and Capital Markets Technology Group of the Investment Bank. In this role, RIVAS had access to an internal, proprietary system maintained by the Investment Bank (the “Deal Tracking System”) containing Inside Information about potential and unannounced merger and acquisition transactions, including tender offers, involving the Investment Bank. The Investment Bank’s written policies prohibited the unauthorized disclosure of confidential information, which included the Inside Information. RIVAS had a duty, among other obligations, to maintain the confidentiality of all of the Investment Bank’s confidential information, including the Inside Information. During his tenure at the Investment Bank, RIVAS reviewed and certified his duties of loyalty and confidentiality to the Investment Bank.

Overview of Insider Trading Schemes

From at least August 2014 through at least in or about April 2017, RIVAS violated the duties of confidentiality he owed to the Investment Bank by serially misappropriating material, nonpublic information from the Investment Bank’s Deal Tracking System and passing that information along to friends so that they could utilize it to make profitable trades. On more than 50 occasions between August 2014 and April 2017, RIVAS provided Inside Information about contemplated but unannounced merger and acquisition (“M&A”) transactions and tender offer transactions involving clients and prospective clients of the Investment Bank to friends who used that information to purchase and sell securities. In total, the insider trading based on Inside Information misappropriated by RIVAS resulted in illicit profits of more than $5 million through trading in more than two dozen securities. The Inside Information was passed through three tipping chains.

Tipping Chain Number 1: Moodhe-Siva Insider Trading

Until June 2017, MOODHE worked as the treasurer and assistant controller for a global interdealer brokerage firm. MOODHE has three adult children, including a daughter not identified by name herein (the “Daughter”). In or about 2013, the Daughter, who at the time lived with MOODHE, entered into a romantic relationship with RIVAS. As the romantic relationship between the Daughter and RIVAS became more serious, MOODHE also developed a close relationship with RIVAS. For more than a decade, SIVA has worked as a broker and financial adviser for a global commercial and investment bank headquartered in Manhattan, New York (the “New York Bank”). By 2014, SIVA and MOODHE had known each other for more than a decade and had a close relationship. In approximately June 2016, MOODHE moved his brokerage accounts to the New York Bank and SIVA became MOODHE’s broker. Prior to that date, MOODHE maintained or controlled several self-directed online brokerage accounts.

Between at least in or about 2014 and 2017, RIVAS repeatedly provided MOODHE with Inside Information misappropriated from the Investment Bank so that MOODHE could execute profitable trades, which MOODHE repeatedly did. RIVAS shared the Inside Information with MOODHE because of their close relationship, including their shared connection with the Daughter. Beginning in at least January 2015, MOODHE began sharing the Inside Information he received from RIVAS with SIVA so that SIVA could execute profitable trades on behalf of his financial advisory clients and himself, which he repeatedly did. Throughout 2015 and 2016, and up through April 2017, MOODHE continued to pass Inside Information he obtained from RIVAS onto SIVA. Throughout this time, SIVA understood that the source of the stock tips provided by MOODHE was a corporate insider at an investment bank with whom MOODHE was friends. In order to keep their scheme from being exposed, including by the New York Bank, MOODHE and SIVA developed code phrases to use on the telephone so that MOODHE could surreptitiously provide SIVA with updated Inside Information. MOODHE and SIVA also began going to various diners outside of New York City so that MOODHE could provide stock tips to SIVA in person. During these meetings, MOODHE read from pieces of paper provided to him by RIVAS, which contained detailed information about confidential impending deals, including ticker symbols, deal values, and expected announcement dates. After SIVA officially became MOODHE’s broker, in June 2016, SIVA instructed MOODHE to mark his illicit trades as “solicited” in the New York Bank’s online trading platform, so that it would appear that SIVA had directed the trades as opposed to the suggestion coming from MOODHE. On occasion, SIVA also instructed MOODHE to wait to trade on a tip from RIVAS until SIVA could first trade in the security on behalf of his financial advisory clients, thereby making it look like SIVA had originated the idea.

SIVA and MOODHE’s illicit trading generated in excess of $3 million in profits. SIVA also earned thousands of dollars in commissions on the illegal trades entered on behalf of his clients.

Tipping Chain Number 2: Rivas to Rodriguez and Sablon Insider Trading

RODRIGUEZ and RIVAS were childhood friends in New York City and have maintained a close relationship as adults. Since at least 2014, RODRIGUEZ lived and worked in Miami, Florida, with SABLON, with whom he was also friends. In or about 2015, RODRIGUEZ introduced RIVAS to SABLON. RIVAS and SABLON then communicated with each other directly and developed an independent relationship.

In or about the fall of 2015, RIVAS disclosed to RODRIGUEZ that RIVAS had access to Inside Information by virtue of his position as a corporate insider at the Investment Bank. At RODRIGUEZ’s request, RIVAS also agreed to share Inside Information with SABLON. While RIVAS had originally agreed to divulge Inside Information to RODRIGUEZ because of their history of friendship, RIVAS also learned that RODRIGUEZ and SABLON intended to start an investment fund with the proceeds of the insider trading scheme. RIVAS understood that in exchange for the Inside Information RIVAS was providing to RODRIGUEZ and SABLON, RIVAS would be invited to join the investment fund as a partner once it was successfully launched.

At first, RIVAS communicated with RODRIGUEZ and SABLON primarily via phone and text message. As the scheme progressed, however, so did the methods used by RODRIGUEZ and SABLON to hide their illegal activity. On several occasions, RIVAS met personally with RODRIGUEZ and/or SABLON in Miami, Florida, in order to provide them with Inside Information. RIVAS also provided RODRIGUEZ and SABLON with Inside Information using an encrypted mobile messaging application (the “Messaging App”), which allows users to set a timer to messages to irretrievably “self-destruct.”

In order to maximize the illicit profits that could be earned using RIVAS’s Inside Information, RODRIGUEZ and SABLON, in consultation with RIVAS, initiated an aggressive strategy of purchasing short-term, out-of-the-money call options. In total, from at least in or about 2015 through at least in or about April 2017, RODRIGUEZ and SABLON earned more than $2 million in illicit profits through insider trading in more than two dozen securities based on Inside Information divulged by RIVAS.

Tipping Chain Number 3: Zoquier-Rogiers Insider Trading

For at least the last several years, RIVAS and ZOQUIER, who lives and works in New Jersey, have had a close relationship. ROGIERS lived and worked in California as a computer and network security analyst and had a close relationship with ZOQUIER. In or about 2013, ZOQUIER introduced RIVAS to ROGIERS. Between at least in or about March 2016 and in or about April 2017, RIVAS repeatedly provided ZOQUIER with Inside Information misappropriated from the Investment Bank so that ZOQUIER could execute profitable trades, which ZOQUIER repeatedly did. ZOQUIER was aware that RIVAS was employed by the Investment Bank and had access to Inside Information by virtue of this position. RIVAS shared the Inside Information with ZOQUIER because of their close personal friendship. Beginning in approximately March 2016, ZOQUIER began sharing the Inside Information he received from RIVAS with his close friend ROGIERS so that ROGIERS could execute profitable trades for himself. Throughout the time that ROGIERS was obtaining Inside Information from ZOQUIER, ROGIERS understood that RIVAS was the source of the Inside Information, to which RIVAS had access as a result of his position as a corporate insider at an Investment Bank. In fact, previously, in or about 2015, at ZOQUIER’s request, RIVAS agreed to meet with ROGIERS and explain the nature of the Inside Information to which he had access. ROGIERS understood that RIVAS was supplying the Inside Information to ZOQUIER because they were friends.

Mr. Kim praised the investigative work of the FBI, and thanked the Securities and Exchange Commission for their assistance. Mr. Kim also thanked the Investment Bank for their assistance during the course of the investigation. He added that the investigation is continuing.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Andrea M. Griswold is in charge of the prosecution.

The allegations contained in the Indictment are merely accusations, and the defendants are presumed innocent unless and until proven guilty.

Defendants and Charges

SIVA, RODRIGUEZ, SABLON, ZOQUIER, and ROGIERS are charged with the following offenses, which carry the maximum prison terms listed below:

Count

Defendants

Charge

Maximum Prison Term

One

SIVA

Conspiracy to Commit Securities Fraud and Fraud in Connection with a Tender Offer

5 years

Two

SIVA

Conspiracy to Commit Wire Fraud

20 years

Three

SIVA

Securities Fraud: Thoratec

20 years

Four

SIVA

Securities Fraud: ADT

20 years

Five

SIVA

Securities Fraud: St. Jude

20 years

Six

SIVA

Securities Fraud: Monsanto

20 years

Seven

SIVA

Securities Fraud: Cabela’s

20 years

Eight

SIVA

Securities Fraud: Mead Johnson

20 years

Nine

SIVA

Securities Fraud: NPS Pharma

20 years

Ten

SIVA

Securities Fraud: ZS Pharma

20 years

Eleven

SIVA

Securities Fraud: AUSPEX

20 years

Twelve

SIVA

Securities Fraud: Diamond Resorts

20 years

Thirteen

SIVA

Securities Fraud: Outerwall

20 years

Fourteen

SIVA

Securities Fraud: Raptor

20 years

Fifteen

SIVA

Fraud In Connection with a Tender Offer: NPS Pharma

20 years

Sixteen

SIVA

Fraud In Connection with a Tender Offer: ZS Pharma

20 years

Seventeen

SIVA

Fraud In Connection with a Tender Offer: AUSPEX

20 years

Eighteen

SIVA

Fraud In Connection with a Tender Offer: DRII

20 years

Nineteen

SIVA

Fraud In Connection with a Tender Offer: Outerwall

20 years

Twenty

SIVA

Fraud In Connection with a Tender Offer: Raptor

20 years

Twenty-One

RODRIGUEZ and SABLON

Conspiracy to Commit Securities Fraud and Fraud in Connection with a Tender Offer

5 years

Twenty-Two

RODRIGUEZ and SABLON

Conspiracy to Commit Wire Fraud

20 years

Twenty-Three

RODRIGUEZ and SABLON

Securities Fraud: Monsanto

20 years

Twenty-Four

RODRIGUEZ and SABLON

Securities Fraud: Twitter

20 years

Twenty-Five

RODRIGUEZ and SABLON

Securities Fraud: Brocade

20 years

Twenty-Six

RODRIGUEZ and SABLON

Securities Fraud: LifeLock

20 years

Twenty-Seven

RODRIGUEZ and SABLON

Securities Fraud: Mead Johnson

20 years

Twenty-Eight

RODRIGUEZ and SABLON

Securities Fraud: Panera

20 years

Twenty-Nine

RODRIGUEZ and SABLON

Securities Fraud: Diamond Resorts

20 years

Thirty

RODRIGUEZ and SABLON

Securities Fraud: Outerwall

20 years

Thirty-One

RODRIGUEZ and SABLON

Securities Fraud: Medivation

20 years

Thirty-Two

RODRIGUEZ and SABLON

Securities Fraud: Raptor

20 years

Thirty-Three

RODRIGUEZ and SABLON

Securities Fraud: Nimble

20 years

Thirty-Four

RODRIGUEZ and SABLON

Fraud In Connection with a Tender Offer: Diamond Resorts

20 years

Thirty-Five

RODRIGUEZ and SABLON

Fraud In Connection with a Tender Offer: Outerwall

20 years

Thirty-Six

RODRIGUEZ and SABLON

Fraud In Connection with a Tender Offer: Medivation

20 years

Thirty-Seven

RODRIGUEZ and SABLON

Fraud In Connection with a Tender Offer: Raptor

20 years

Thirty-Eight

RODRIGUEZ and SABLON

Fraud In Connection with a Tender Offer: Nimble

20 years

Thirty-Nine

ZOQUIER and ROGIERS

Conspiracy to Commit Securities Fraud and Fraud in Connection with a Tender Offer

5 years

Forty

ZOQUIER and ROGIERS

Conspiracy to Commit Wire Fraud

20 years

Forty-One

ZOQUIER

Securities Fraud: St. Jude

20 years

Forty-Two

ZOQUIER

Securities Fraud: Twitter

20 years

Forty-Three

ROGIERS

Securities Fraud: Cabelo

20 years

Forty-Four

ROGIERS

Securities Fraud: Macy’s

20 years

Forty-Five

ZOQUIER

Securities Fraud: Diamond Resorts

20 years

Forty-Six

ZOQUIER

Securities Fraud: Outerwall

20 years

Forty-Seven

ROGIERS

Securities Fraud: Outerwall

20 years

Forty-Eight

ZOQUIER

Securities Fraud: Medivation

20 years

Forty-Nine

ROGIERS

Securities Fraud: Medivation

20 years

Fifty

ZOQUIER

Fraud In Connection with a Tender Offer: Diamond Resorts

20 years

Fifty-One

ZOQUIER

Fraud In Connection with a Tender Offer: Outerwall

20 years

Fifty-Two

ROGIERS

Fraud In Connection with a Tender Offer: Outerwall

20 years

Fifty-Three

ZOQUIER

Fraud In Connection with a Tender Offer: Medivation

20 years

Fifty-Four

ROGIERS

Fraud In Connection with a Tender Offer: Medivation

20 years

[1] The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.